Sundial and Charms Seek $2M From Cardano Treasury for Alchemy Bitcoin Liquidity Protocol

Alchemy Brings a BTCFi Proposal to Cardano

Sundial Protocol and Charms have introduced Alchemy, a proposed Bitcoin treasury and liquidity protocol that would bring structured BTC-backed assets into the Cardano DeFi ecosystem. The initiative is centered on a shared Bitcoin reserve that would support two Cardano-native assets, FIRE and ICE, giving users different ways to access Bitcoin exposure through Cardano wallets, DEXs and future DeFi applications.

The announcement was also amplified by Sundial founder Sheldon Hunt, who framed the partnership as a broader push to bring Bitcoin liquidity and market-facing products to Cardano. In a follow-up post on X, Hunt wrote that “the fight back for ADA and BTC begins now,” adding that Sundial and Charms are partnering to build infrastructure and products that move market activity toward Cardano and Bitcoin. Sundial’s original post also invited community feedback before the treasury proposal goes live, making the announcement both a product reveal and an early governance signal.

The proposal is expected to go on-chain in June 2026 and asks for $2 million in Cardano treasury funding, estimated by Sundial at about 9.3 million ADA. The request is divided into two separate pools. The first $1 million would fund protocol development, security audits, economic modeling, DEX integrations, monitoring infrastructure, legal work and launch execution. The second $1 million would be used as treasury-owned launch liquidity to help bootstrap Alchemy’s initial BTC reserve.

That structure gives Alchemy a different profile from a standard ecosystem grant. Sundial says the launch liquidity would remain owned by the Cardano Treasury, would be deployed in staged tranches and would return generated yield to the Treasury on a quarterly basis. The proposal also includes an ADA price protection mechanism, where future milestone withdrawals would be reduced or excess ADA returned if ADA rises above the stated threshold before or during delivery.

FIRE and ICE Create Two Bitcoin-Backed Cardano Assets

Alchemy is described as a Bitcoin refinery protocol. Users would deposit BTC into a shared on-chain reserve, and the protocol would convert that reserve into two complementary assets with different risk profiles. FIRE is designed for users who want amplified exposure to Bitcoin upside, while ICE is designed as a USD-denominated, BTC-backed asset with gradual redemption-value growth.

In the proposed model, FIRE absorbs more of the short-term volatility and provides the reserve buffer behind ICE. If Bitcoin rises, FIRE holders could capture additional upside after ICE commitments are met. If Bitcoin falls, FIRE takes more of the downside risk, while ICE is designed to keep a more stable redemption profile inside the protocol’s reserve rules. Sundial says minting and redemption would be governed by reserve-ratio thresholds, including tighter safety limits when collateralization weakens.

The structure is similar in logic to Cardano’s DJED and SHEN model, where one asset is designed for stability and another absorbs volatility. The key difference is collateral. DJED is backed by ADA, while Alchemy would be entirely backed by BTC. That makes the proposal a BTCFi infrastructure play rather than a conventional Cardano stablecoin model.

Charms is the technical partner in the proposal. Sundial describes Charms as a Bitcoin meta-protocol specialist with an open-source protocol, a Bitcoin-native DEX, a live Cardano and Bitcoin bridge called eBTC and more than 3,000 wallet users. Under the proposal, Charms would support the protocol layer and mechanics that allow FIRE and ICE to be issued through Bitcoin infrastructure while circulating as Cardano-native assets across the Cardano DeFi stack.

Cardano Treasury Faces a Liquidity Funding Decision

The most important part of Alchemy is the funding structure. Sundial and Charms are not only asking Cardano governance to fund software development. They are asking the treasury to help seed a BTC-backed liquidity system that could create reusable DeFi assets for wallets, DEXs, lending platforms and dashboards across the ecosystem.

That makes the proposal a direct test of how Cardano’s treasury should approach liquidity funding. A standard development grant pays for work. Alchemy adds a second layer, treasury-owned capital deployed into a protocol reserve, with public reporting, audit gates, staged releases and a planned yield return path back to the treasury. According to Sundial, the principal from the launch liquidity position could also be returned through a formal governance vote if Alchemy grows beyond $60 million in TVL.

Sundial lists several risk areas, including BTC price exposure, oracle and bridge dependencies, legal and regulatory analysis, and delivery execution. The proposal says these risks would be addressed through independent security audits, reserve threshold mechanics, milestone-gated delivery, staged liquidity deployment and governance-facing reporting.

For Cardano, the Alchemy debate will likely focus on one practical question, whether treasury capital should be used only to fund builders, or whether it can also be used to create protocol-owned liquidity under public governance controls. Sundial and Charms are framing Bitcoin liquidity as a DeFi input that Cardano can host natively, not just a narrative imported from other chains. When the proposal reaches DReps, the decision will show how far Cardano governance is willing to go in connecting treasury funding, BTCFi infrastructure and ecosystem liquidity into one proposal.